State Farm admits AI fake cases in LA lawsuit

Lawyers for a Los Angeles firm representing State Farm in a lawsuit involving the rebuilding of a home after a fire have apologized for artificial intelligence hallucinations in their filings.

The homeowner's lawyers discovered in motions filed by State Farm "cases that do not exist, quotes that do not exist, and holdings that do not exist," according to a filing by Eric Khodadian, who is representing Fa'alagilagi Meni-Siliga.

Meni-Siliga filed her lawsuit in July 2024, naming a contractor and the contractor's insurance company, a public adjuster and her homeowners insurance company, State Farm, as defendants.

A fire in her home in Carson, in Los Angeles County, in 2020 caused her home to become uninhabitable, according to the lawsuit. While her contractor was working on the home, a storm caused water damage. After what she said were delays getting State Farm's approval for repairs, the work on her home was never completed, according to a January court filing. She and her husband have drained their savings and retirement accounts, declared bankruptcy and lost their home to foreclosure, she wrote.

"My family and I have lost forever our family home," Meni-Siliga, a U.S. Postal Service carrier, wrote. "We do not come from money … It took many years and sacrifice for our family to purchase our home."

In its original answer to her complaints, State Farm said negligence by the plaintiff, her contractor and public adjuster led to the injuries and damages she suffered. The insurer also said she failed to bring her legal action within a year of the original loss or damage.

The case is set to go to trial in October.

The legal industry is increasingly turning to AI: 41% of law firms and 47% of corporate legal departments said they are using generative AI, according to one recent survey.

That has meant legal hallucinations have become more prevalent, said Daniel Ho, a law professor at Stanford University who has researched the issue. In one paper Ho co-wrote last year, he and fellow researchers found that a couple of companies "overstated" that their legal research tools could guarantee hallucination-free legal citations.

A database of legal hallucinations around the world maintained by a Paris-based legal researcher has found 1,922 cases so far; most of them occurred in the United States.

Last year, a California attorney was fined a record amount, $10,000, for using ChatGPT in an opening brief that contained 21 made-up quotes out of 23.

Khodadian shared his findings at an Aug. 7 conference in Los Angeles Superior Court. He wrote in a filing later that a State Farm lawyer was "visibly enraged" afterward and followed him and his co-counsel down the hall, "repeatedly demanding to see the list" of mistakes they had found.

That lawyer was Kenneth Katel of the firm Musick, Peeler & Garrett, who in his filing apologized to the court and to the plaintiff, explaining that his co-counsel told him she used AI to help prepare some filings.

"I was not aware that AI had been used, but as lead trial counsel I accept full responsibility for our filings," Katel wrote. He also told the court that his firm has updated its policy about AI use but did not provide specifics.

Katel disputed Khodadian's characterization of what happened after the hearing, though he wrote "it is accurate to say I was upset given the seriousness of the allegations."

Khodadian and Katel declined to answer questions from CalMatters.

The lawyer who used AI in motions on behalf of State Farm, Jacquelene Robinson, wrote in a filing that she confirmed there were seven case citations across eight filings "that simply didn't exist," as well as some incorrect titles of cases and quotes that were not found in cases she cited.

Robinson said she used an AI tool called Irys, which she incorrectly thought was tied to her law firm's subscription to a legal research tool called Westlaw, which she thought "performed an internal cite check." She was mistaken, she wrote.

State Farm is reviewing what happened, spokesperson Tom Hartmann said. "State Farm expects its external counsel to conform to the highest level of ethical standards and professionalism, including confirming the accuracy of all legal filings," he said.

Hartmann did not respond to questions about how many external law firms represent State Farm, and whether the company asks about their AI policies before hiring them.